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. Last Updated: 07/27/2016

Putin Tells Fischer He's Ready to Work




President-elect Vladimir Putin said Thursday that Russia is ready to move toward improving relations with the International Monetary Fund and said there is a good basis for preparing a new joint program to reactivate the fund's long-frozen loan program.


"We are full of determination to develop our relations with international financial organizations in general and with the IMF in particular," Putin said at the start of his first meeting with acting IMF head Stanley Fischer since becoming Russia's head of state, Interfax reported.


But earlier Thursday, Fischer had harsh words for Russia's slow progress in implementing structural reform.


"The good economic performance since early 1999 cannot be sustained without a broad-based acceleration of structural reforms," Fischer told an international conference in Moscow.


Fischer said Russia's current economic boomlet was fueled mainly by the sharp ruble devaluation of 1998 and the jump in world oil prices - and that those favorable conditions could peter out in the near future.


Last September, the IMF froze a $4.5 billion loan program because it said the government had failed to meet structural benchmarks under the fund's agreement with Russia. However, there has also been speculation the program was put on hold because of concerns that IMF funds might indirectly go towards financing Russia's war against Chechnya.


Fischer said Thursday that for Russia to sustain the economic growth achieved during the last year - when according to official data GDP climbed 3.2 percent - the government needed to make more progress in six priority areas including industrial restructuring, the elimination of the non-payments system, the restructuring of the banking system, reforms of the Central Bank, the tax system, agriculture and land ownership, and the strengthening of the social safety net.


Pushing through these reforms was the key to improving the business climate and attracting investment to fuel real long-term growth, he said.


"It cannot be overlooked, however, that many, if not most, of the proposed measures have already been part of government programs in the past - they have just not been implemented," Fischer said. "The poor record reflects, fundamentally, a failure to overcome fierce resistance from vested interests in the face of weak government consensus."


He said the main question was whether the new Putin administration would create "a coherent reform strategy and implement it."


"Why mention these past failures?" Fischer asked. "Because this, the start of a new administration, working with a new Duma, presents a rare opportunity for a new beginning."


However, the new president-elect did not appear to be rushing toward that new economic beginning Thursday. Fischer was kept waiting in the Kremlin for about an hour by the new leader who returned late from a jaunt in a nuclear submarine in the far north seas.


Other top Russian officials also did not seem to be betting on IMF support Thursday and analysts said it was too early to expect a re-animation of loans.


First deputy Prime Minister Mikhail Kasyanov said Russia could scrape by this year without any loans from the fund, but that $1.5 billion would allow the government to avoid cuts in social spending and regional subsidies.


"Nothing dramatic will happen if suddenly there are no external sources of money, though there probably will be in April, May or perhaps in June," Kasyanov was quoted as saying in Thursday's edition of Kommersant.


Yevgeny Yasin, the head of the High School of Economics and one of the key economists working on Russia's ten-year economic strategy, said the time may have come for Russia to do without IMF funds, except "in emergencies."


Central Bank head Viktor Gerashchenko also was busy calculating how Russia could manage without forecast funds from the IMF. He said the Central Bank's main priority was to raise hard currency reserve levels to make sure Russia could pay off its external debt.